Analysis of Life Insurance

Sector
(Life Insurance

Presented by
Ashish Chandra (29041)
C. Sudhir (29044)
Parvati Singh (29055)
Sharat Jha (29065)

Institute of Rural Management, Anand

Demographic environment
India has, according to 2001
census, 65.38% literacy rate. The
literacy rate varies across rural
(59.4%) and urban (80.3%) India.
These contrasts in literacy levels
are significant and have important
implications for insurers.
Literacy and education increases
employability of the person in
higher earning jobs and also brings
about a change in perception about
need for insurance.
The median age in country was
.

Education level
Political and legal
environment
IRDA Act 1999
 The Bill allowed for up to 26% foreign equity
participation in the insurance sector.
 The minimum paid up equity capital, excluding
required deposits with the RBI and any preliminary
expenses in the formation of the country, requirement
of an insurer would be Rs 100 crore to carry on life
insurance business
 Insurance business in Rural Sector: -
After the commencement of the IRDA Act, 1999,
(Malhotra committee) every insurer would have to
undertake such percentage of life insurance business
in the rural sector as may be specified by the IRDA in
this behalf. It is mandatory for the new companies to
meet the obligations relating to the rural and
Economic environment
Inflation rate: -
Inflation can also be one of the causes to
change the scenario of the insurance
sector. High inflation for instance, would
tend to reduce the insurance business,
particularly life, because the real value
of the money paid back to the
policyholder on maturity of the policy
would go down and would, therefore,
lose its attraction for the investor.
Impact of income on insurance: Income
level significantly affects the demand
for life insurance. Life insurance
becomes more affordable when income
increases((Rubayah and Zaidi (2000)).
Socio-Cultural and
technological environment
Decline of joint family structure has added to
need for insurance.
New channels like Bancassurance, corporate
agents and websites selling life insurance
products are ubiquitous testaments to how the
channels have grown in terms of not only selling,
but also increasing awareness about life
insurance.
More innovative channels like a supermarket, a
bank, a post office, an ATM, an internet kiosk or a
departmental store could be introduced in the
future. . For example MetLife India, a subsidiary
of global insurance giant, entered into a strategic
tie up with Viswas, a Hyderabad based retail
chain, to offer life insurance and other financial
products in the rural areas.
Company- LIC
 Life Insurance Corporation was formed as a
government regulated monopoly in
September 1956 by an Act of Parliament,
(LIC Act 1956) with a capital contribution of
Rs. 50 million.
 The total life insurance market can be
judged on two parameters – premium
collected and number of new policies
underwritten. It can be seen that LIC has a
market share of 53% which roughly
amounts to Rs. 20000000 crores out of a
total market of 4.3 crore crores.
 The number of players in this segment
have increased to 30 (15 in private sector),
with Life Insurance Corporation (LIC) being
the dominant player (market share of over
Objectives
• When The Life Insurance Corporation of India
was set up in 1956, its primary objective was to
propagate the idea and practice of life insurance
in rural areas among financially backward people
so that their risks were covered in the event of
death.
• The Life Insurance Corporation of India intends to
increase the mobility of individual savings to the
maximum extent possible.
• The Life Insurance Corporation of India seeks to
employ the investments of its customers in the
best possible manner while at the same time
prioritizing matters of national importance.
• The company aims at meeting the dynamic
expectations of its investors by adding
innovative schemes and products to its portfolio.
Culture
• LIC has had many problems relating to
the efficient use of its human resources
since the time it was set up.
• Many of these problems related to the
fact that it was a public sector
organization. The corporation's
managers were too bureaucratic.
• The work culture in the organization
was sloppy.
• Strong trade unions made it difficult for
managers to get the work done.
• The corporation's development officers
focused on their own earnings and
incentives, rather than on customer
Product line
• Schemes: money back plans, whole life
plans, and term assurance plans, several
special insurance plans for children,
women, physically challenged dependants,
and high net-worth individuals. 
• Pension plans - Jeevan Nidhi, Jeevan
Akshay, Jeevan Dhara, and Jeevan
Suraksha.
• The company has 3 Unit plans - Market
Plus, Profit Plus, and Fortune Plus.
• Group schemes - Gratuity Plus, Group
gratuity Scheme, and Group Leave
Encashment Scheme. 
• New plans- ULIP, health insurance
• In 2005-06 , LIC added as many as
Competitors of LIC
Private players allowed in the
market in 2000
Currently, close to 30 public and
private firms in India dealing in
life insurance
 Competitors of LIC

Source: IRDA annual report 2008

 An overview of the
competitive life insurance
POTENTIAL
ENTRANTS SUBSTITUTES
DLF PRAMERICA UNIT PLUS (SBI
LIFE, STAR UNION LIFE),
DAI-CHI LIFE, NEW CAPITAL
FUTURE GENERALI GAIN (BAJAJ
LIFE, SRIRAM ALLIANZ) etc.
SUNLAM LIFE
INDUSTRY
COMPETITORS
LIC, BAJAJ ALLIANZ,
SBI LIFE, RELIANCE
LIFE, HDFC
STANDARD LIFE,
BIRLA SUN LIFE, MAX
NEW YORK LIFE,
KOTAK MAHINDRA
BUYERS SUPPLIERS
SWITCHING TO GROWING POWERS
DIFFERENT BANKS, CA ARE
INVESTMENT IMPORTANT
SECTORS FOR BETTER CHANNELS TO REACH
RETURNS, THE CLIENT. HIGH
UNDIFFERENTIATED BARGAINING POWER
PRODUCT
Comparisons between the trio
Distribution Network
vLIC
8 zonal offices, 100 divisional offices,
2048 branch offices. Agents over 10 lakhs
and 26 bancassurance partners

vICICI Prudential
2100 branch offices, agents over 2.9
lakhs, 18 bancassurance partners

vBajaj Allianz
1200 branches, agents over 2.5 lakhs,
tie-ups with 5 co-operative banks
Comparisons between the trio
(contd)
Grievances
◦ Grievance settlement ratio was 90%
for ICICI Prudential, 81% for Bajaj
Allianz and 12% for LIC
• Promotion expenditure
Ø LIC - Rs. 116 crore in 2008
Ø Bajaj Allianz – Rs. 17.7 crore in 2008
Ø ICICI Prudential – Rs. 15.4 crore in 2008
 Financial comparisons with
competitors
Bajaj Allianz – S.W.O.T.
ICICI Prudential – S.W.O.T.
LIC – S.W.O.T.
Comparison of similar policy
of competition
Market Size and Growth
205.9 million households
61.4 million urban households
Rs 1.5 lakh crore premium
collected (industry) in 2006-07
(19.9% growth vs 2.9% growth in
world market)
Life Insurance penetration ≈ 3 %
Consumer Behaviour
Cultural Factors
◦ Unnatural events
◦ Sub culture (Urban-Rural divide)
Awareness, Per Capita Income
Middle class – for protection & savings
Upper class – for investment, tax benefit & savings
Social Factors
◦ Reference group, family, status
◦ In joint families less stress on buying insurance
◦ Women factor
Personal Factors
◦ Buyer’s age
◦ Stage in Life cycle
◦ Occupation
◦ Economic Circumstances
◦ Personality
◦ Life style
 Consumer Behaviour
Benefit that consumer is seeking
 Consumer Behaviour
Where are the present investments?
Factors Influencing final
choice of life insurance
Type of Insurance preferred
by consumers
Major factors influencing decision to purchase
insurance

4% 12%
10%
advertisement
7% agent
friends and nieghbours
12% family
co workers
others
55%
preference for mode of payment of premium

2%
2% 8%

28% single premium

annual
half yearly
monthly
Quaterly
60%
Major decision maker in buying the policy

1%
17%

policy holder
spouse
15%
parents
children
67%
Short term objectives
To invest an additional Rs. 4000
crore in the stock market
It would employ 11 lakh more
agents to double its field
workforce
Long term objectives
Spread life insurance to the rural
areas and socio-economically
backward classes
Maximize mobilization of people’s
savings by making insurance-
linked savings more attractive
Involve all people working the
Corporation to the best of their
capability in furthering the
interests of the insured public
References
 www.irdaindia.org
 http://www.mouthshut.com/review/Life_Insurance_Corporation-129119-
 http://www.financialexpress.com/news/lic-to-hike-advertising-spend-to-t
 www.licindia.com
 The Marketing Whitebook 2009-2010
 Marketing Management – 13th Edition, Kotler, Keller, Koshy & Jha
 http://www.business-standard.com/india/news/insurers-miss-outrural-so
 Life Insurance in India : Emerging Issues (Indira Gandhi Institute of
Development Research)
 http://www.financialexpress.com/news/pvt-players-snuffing-life-out-of-m
 http://www.icmrindia.org/casestudies/catalogue/business%20strategy5/
 http://www.rediff.com/money/2005/dec/19guest1.htm
 http://en.wikipedia.org/wiki/Tertiary_education_in_India
 http://www.topnews.in/lic-invest-rs-4000-cr-stock-markets-march-2009-
 http://www.licindia.com/objectives.htm
THANKYOU!!